High demand for venue audit trail in FIX

Almost nine in ten buy-siders want FIX messages to carry information about which venues their order has visited despite a lack of standardisation, according to a survey conducted by FIX Trading Community.

Almost nine in ten buy-siders want FIX messages to carry information about which venues their order has visited despite a lack of standardisation, according to a survey conducted by FIX Trading Community.

The survey, led by co-chair of FIX’s buy-side panel and senior quantitative trader at Alliance Bernstein, Michele Patron, will set out FIX’s agenda for developing its buy-side offering.

One of the key FIX tags used by buy-side traders is Tag 30, which currently contains information on which venue a trade was executed. Currently, the tag is still in development and lacks standardisation of message codes, something that two thirds of survey respondents want to see added.

"Tag 30 is being widely used but at present there's no clear standardisation of that tag so we're going to keep working on it and make more tweaks this year," said Patron.

Though the tag has yet to be standardised, buy-siders want to see it expanded already, with 86% calling for “path to execution” information to be contained in the fix message, showing which venues an order was placed on during its lifecycle.

“The path to execution, which we want to make part of Tag 30 is in high demand by the buy-side so they can track which venues their order is going to before it is executed,” Patron told theTRADEnews.com.

“There are some issues that still need to be worked out though, such as whether we should press ahead with this before we have standardisation and also around the big data stream that all this information would create."

Among FIX Trading Community’s key priorities is to ensure that FIX messages are able to be send quickly so adding additionally data will delay them slightly. On top of this, buy-siders will need to develop systems capable of capturing the additional venue information contained in Tag 30 and then be able to analyse it to inform their trading decisions and measure whether best execution was achieved.

Riskless principal

Patron has also been working on developing Tag 29, which covers the broker’s role in making a trade. Currently, Tag 29 has 4 values covering those acting as agent, crossing as agent, crossing as principal and principal.

The tag is not currently widely used, with 67% of buy-side respondents to the survey stating they were not yet using Tag 29.

To boost its use, Patron is looking to add a new value: "Tag 29 needs to have a 5th value that will define whether riskless principal was use in the trade but this has some complications, particularly around the definition of riskless principal. While there is a clearer legal definition, what the buy-side really needs is a business definition which makes sense for the way riskless principal is used in the market."

Three quarters of survey respondents said this additional information would be useful for Tag 29 and it is hoped its uptake will increase as a result.

While issues with Tag 30 will require more in-depth discussions among the FIX community, Patron is hopeful that riskless principal can be included as a Tag 29 option in the first half of 2014. 

FIX for IPOs

Patron’s co-chair and global head of trading at Baring Asset Management, Adam Conn, is also working on new initiatives this year and will be pushing to make FIX compatible with IPOs to enable buy-side investors to automate applications for new issues.

Conn said key issues that need to be resolved to make this work will include getting stock tickers set up much earlier than at present.

“Tickers can be reserved up to six months in advance but aren’t usually made public until just before the IPO,” Conn said.

In order to be ready to automate order flow, earlier tickers would help with the setup. FIX also wants orders to be sent out on a ‘good for the day’ basis rather than ‘good until cancelled’ to make it easier to automate. While there are some concerns among firms that operate in the space, Conn said the overwhelming buy-side demand for automated IPOs means the industry needs to look at ways to move forward.